Lean inventories could speed recovery

The semiconductor industry will suffer double-digit contraction in 2009, but lean inventories across the supply chain could jump-start a rapid recovery when the economy finally starts to improve, an analyst said Monday (March 9).
Delivering a forecast at the Semico Summit 2009 here, Jim Feldhan, president of Semico Research Corp., predicted that semiconductor revenue will decline by about 15 percent this year, down to roughly $213 billion. But Feldhan forecast that revenue would grow by 13 percent in 2010 to reach $244 billion and continue steady growth to pass $330 billion 2013. Feldhan said the chip industry reacted quickly to the deteriorating economy and that he believes there is a lot of opportunity for a recovery.
"It's not going to be a good year, but I don't think we are going to see as disastrous a year as we did in 2001," Feldhan said. Following the bursting of the dot com bubble, semiconductor revenue in 2001 declined more than 32 percent from 2000.
Discussing inventories, Feldhan cited as an example Apple Inc.'s popular iPhone. Sales of iPhones continue to grow, he said, noting that the product is now available in some Walmart locations. But Feldhan said he has heard reports that the contract manufacturer that produces the iPhone has cut orders for components, simply because it didn't want to be caught holding excess inventory.
"I think at this point everyone is fearful of holding inventory," Feldhan said.
Because inventories are being kept low, Feldhan said, there is likely to be a "whiplash" effect when the economy starts to recover and orders improve. He added that the industry is likely to see a few false starts on demand improvement before it stays steady.
"We are having a hard time finding anyone who admits they still have a lot of inventory," said Joanne Ito, a senior analyst at Semico. "It's not anything close to 2001." Semiconductor industry revenue contracted in every month from October 2008 through January of this year, Feldhan said, the first time that has ever happened during that time of year. But unlike previous downturns, Feldhan noted, this one was not preceded by a big dramatic peak of double-digit growth. http://www.shining-tech.com/